An organizational initiative to promote autonomous self-managed work teams provides an example of the prisoner's dilemma. In this example, the individualistic desire to protect or enhance the relative power of middle management or union leadership predicts the demise of the initiative. Non-cooperation offers the highest potential individual outcome though cooperation leads to higher outcomes than mutual non-cooperation. Yet, to be the sole cooperative party yields the worst possible outcome, thus individualistic rationally suggests uncooperativeness as the best negotiating position.

If a proposed self-managed team initiative gives the team the power to set work schedules, work tasks, work rules, hiring and firing, solving problems, construction of performance rewards, direct coordination with other work teams or customers, or other similar authorities, the power and status of middle management and union leadership can be threatened (Levine, 1995). Workers no longer need middle management to solve problems, schedule work, monitor performance, or perform certain human resources functions. Similarly, workers can negotiate directly with other organizational members and set their own work rules without mediation by union leadership. Levine noted that worker participation challenges union member solidarity as a force "united against management" (p. 66). Self-managing teams threaten union leadership's role as mediator between the worker and management, and middle management's role as mediator between line workers and senior management. Levine found that joint union and management involvement was essential to successful implementation of employee empowerment initiatives. Figure 2 illustrates hypothesized outcomes of cooperation versus non-cooperation in a self-managed team initiative.

If middle management yields authority to self-managed teams, but union leadership refuses to relinquish its right as exclusive mediator, self-managed teams would defer to union leadership prior to initiating new work arrangements or task reassignments. Middle management would lose power and stature relative to the union, a win for union leadership. When both middle management and union leadership actively participate in setting up self-directed teams, with each yielding certain authorities and organizational power to the teams, union and leadership co-management might elevate their relative positions of power and status within organization. However, if union leadership grants authority to the self-managed teams, but middle management refuses to yield, middle management assumes power over roles traditionally influenced by union leadership, such as work rules, task characteristics, and reward structures; a loss in stature and power for union leadership. Instead, union leadership might find that meeting a non-cooperative middle management with non-cooperation will retain the exiting union-management relative positions of power, though bringing about the failure of the initiative and possible deterioration in subsequent cooperative endeavors.

Unless management and union leadership hold sufficient trust that each party will enact and enforce promises yielding power to self-managed teams, mutual non-cooperation becomes the predicted outcome. Resolution of the prisoner's dilemma suggests a strategy where participants learn that consistent cooperation yields higher outcomes than mutual non-cooperation. In a series of computer mediated interactive prisoner's dilemma tournaments, Robert Axelrod discovered that the Tit-for-Tat (TFT) strategy produced the learning required to promote cooperative outcomes (Poundstone, 1993).